Hello, everybody. I'm Stefano Canu, the company Investor Relations. Welcome, thank you for joining the Sogefi full year 2022 results. As a reminder, the participants are in listen-only mode. After the presentation, there will be a Q&A session. At this time, I would like to hand over to Frédéric Sipahi of Sogefi. Please, Frédéric, go ahead.
Thank you, Stefano. Hello, ladies and gentlemen. Thank you for joining this call. For this year, we are very happy to be present with you to present you the 22 results. As you will see, we have been able, thanks to the strong actions we have implemented, to deliver improving results. I hope that you will acknowledge them. Let's start the presentation.
Mariella Fruttale.
Is now exiting.
As you can see, and you will see, we present that in detail to you. We are beating the market in all geographical areas, thanks to first strong price increase with our customers, positive ex-exchange, and also good volumes, especially in aftermarket, in China and in North America also. We have been able to manage in a very, very efficient way the raw material and energy price increase with our customers. We have continued to do the job from a cost point of view and adapt our costs and the organization to the new condition of the market.
In terms of financial highlights, our revenues are at EUR 1.5 billion versus EUR 1.3 billion in 2021, +12.6% at constant exchange rates, benefiting of price increase as Fred explained.
We are overperforming the market. Our volume is positive by 3.9%. Our EBITDA is at EUR 195 million versus EUR 192 in 2021. Our contribution margin is at EUR 425 versus EUR 404 in 2021. Our EBITDA, excluding non-recurring, EUR 153 versus EUR 180 in 2021. Our gross fixed cost, substantially stable despite the inflation, at EUR 232 versus EUR 226 in 2021, with ratio to sales down from 17% to 15%. Our EBIT is at EUR 68.3 versus EUR 58.4 in 2021, with higher growth in value excluding non-recurring, EUR 74.2 versus EUR 51.7.
At the end, our net income up at EUR 29.6 versus EUR 26.4 in 2021, excluding the accounting impact of Argentina in 2021. This good EBIT and results reflecting the free cash flow. We have a free cash flow at EUR 30.5 versus EUR 35 in 2021, but including positive non-cash effect of the Argentine disposal in 2021. Our net debt is now at EUR 224 versus EUR 258 in December of 2021, which is. If we want to go to sales to geographical area.
Thank you, Olivier. Yeah. As I was anticipating before, basically, as you can see, we have beat the market in all geographical areas. The reported change versus 2021 is almost 18%. At constant exchange rate, 13%.
We have been helped by the exchange rates, mainly in North America and South America, with Brazil and Argentina. Let's take Europe first. Europe, we are increasing at constant exchange rate by 10% when the market is up by 6. North America, it has been very dynamic. We are up by 17% versus 10. South America, 16 versus 8, the double. China, we are in line with the market, and India is going very, very well. In India, we have almost an increase of 30% of our turnover, which is quite amazing for a market increasing by 22%. If we look at these figures by business unit, sorry, all the three business units performed quite well. Air & Cooling at constant exchange rate is 9% increase.
Filtration, supported mainly by aftermarket, 12%, and Suspensions, 17%. In this slide, the turnover by customers. It's important to see that we have added a few new customers. We have included the Chinese and the Japanese. You can see that we are rebalancing slowly but surely our portfolio of customers, reducing the dependency on the bigger one. Aftermarket, as you can see, is also very important in our portfolio. I was mentioning the Chinese OEM, which are now in the top 3 of our customers with the top 10, sorry, including also the Japanese.
The bridge, Olivier, versus last year for the EBIT. Excluding the non-recurring and non-operating cost, we have an EBIT which grow from 51.7 to 74.2. The main impact are the volume effect, 8.6. The squeeze effect, the delta between price increase and raw material increase by 2.9, which offset almost all the carryover coming from 2021 on price and the effect of the Romanian ramp-up in our PBS. We have lower D&A and a positive impact of the exchange difference of EUR 4.5 million. In terms of P&L, we already talk about the main item, revenue at EUR 1.5 billion, contribution margin at EUR 27.4 million.
Excluding the dilution due to the selling price increase, we should be at EUR 28.7. The raw material and energy costs rise fully compensated by repricing. Our EBIT at EUR 68.3. In 2021, our EBIT was sustained by positive non-recurring operating item. When in 2022, we don't have this effect, the increase is due to the business. As you can see, EBIT excluding non-recurring, which comes from EUR 52-EUR 74. In terms of net income, we will be at EUR 29.6 compared to last year including, sorry, last year, the impact of the Argentinian operation. Our Q4 P&L an increase of 16.9% compared to last year, thanks to repricing in positive volumes. We...
At constant exchange rate, we would be at 15.4. We are overperforming the market, 1.7% globally. The EBIT 2022 is including negative non-recurring operating items like exchange difference and a pension fund settlement in the U.K. We decided to take the opportunity of the lower interest rate to proceed to a buyout in our Suspensions business units. In terms of EBIT, we talk about the raw material energy cost compensated by repricing. Q4 2021 benefit, as we said, from recognition of deferred tax assets. That's why we have an income tax so different than last year. Free cash flow, last year, we had the funds provided by operation at EUR 114, 2022, EUR 128. Free cash flow, EUR 35, comes to EUR 30, thanks to CapEx containment.
In 2021, we had EUR 21 million coming from the Argentina disposal, which was a non-cash issue. At the end, we have been able to maintain our working cap increase by using factoring. You can see that the amount is quite, the increase in factoring is just due to the increase of the sales. We do not use proportionally more factoring than last year. That's for us, a robust cash. In terms of debt profile, no big change compared to the end of September. We still have EUR 150 million of line committed and drawn and maintain as security. Our average maturity is 3.1 year. As a reminder, roughly 50% of our debt drawn, I'm talking about debt without IFRS 16, is at fixed exchange rates.
We are exposed on the increase only on half of our debt, increase of interest only on half our debt.
Thanks, Olivier. Let's look at the results by business unit. Suspensions, despite all the challenge of 2022, including the steel price and energy, we have been able, at worldwide level, to improve the EBITDA in absolute value, from EUR 27 million to EUR 30 million, slower, slightly slower in percentage. As you know, this business unit requires a strong turnaround. We have implemented strong action in 2022 in order to get the payback in 2023 and the years after. If we look at Filtration, the Filtration results are improving. Our EBITDA was at EUR 17 million last year in 2021, up to EUR 18 million, able to keep the EBITDA in percentage despite the price increase, so despite the dilution impact.
Here we have done a very good job in order first to increase the range of product we were able to the customers. We have been able also to deliver always on time, which has been very appreciated by our customers, which help us to improve our pricing level. If we look at Air & Cooling, the trend is slightly the same. Basically, we were at EUR 82 million last year. We are at EUR 80 million in 2022, with an EBITDA margin at 17.3% versus 20% due to the dilution impact for the repricing that we have done, especially on the aluminum and plastic with our customers. This is about the financial results 2022. In 2022, as you can see, we have done the job from a financial point of view, but also we continue the development of the business.
In Air & Cooling, we have continued the development in e-mobility that we started 6 years ago. In Filtration, we are performing very well with our current product range, but we have also started the switch to new product range, increasing purification. In Suspensions, as you all know, in 2022, we have done all our work from a footprint point of view. We closed 1 factory in Europe in order to adapt to the volume environment. Of course, last but not least, we commit and we continue to commit in a very pragmatic way and operational way on all ESG topics during 2022. I was speaking about the business development in order to prepare the future. In Air & Cooling, always focus on the cooling application and the thermal management product.
We have been able to be awarded with a big customer in U.S.A., specialized in the LCV. We have also started our cooling plates, on which we were working for the last two years with a totally new technology, consuming less energy, less material, offering to our customer a lot of competitive advantage for the plates, which are welded with a laser technology that we have patented. Battery vent systems. Sorry. We have developed Air & Cooling and Filtration have worked together on this technology. The two business units have been able to develop this product that we are offering to our customers in Europe and in North America.
In Suspensions, we have been awarded in China with a pure player on e-mobility, which is a newcomer in automotive, but very well-known in the electronic applications. The car will start in mass production end of 2023. For us, it's a very, very important move in order to develop in China with these players. If we look at Air & Cooling, the product range of our products, remember we started seven years ago, entering in the business with our manifolds and our water pumps that we have slowly but surely adapted to the EV in order to be able to propose totally new products to our customers on the thermal management of the battery and the electronic, including our plates, including the battery vent, and including the cooling modules.
It's totally new game for Sogefi because we are switching from products which were delivered as a single product to modules with much more added value and totally answering to the request of the market of consuming less energy, being greener and consuming less material, and of course, being price competitive. One thing which is very important, even with the very big part of North American business in Air & Cooling, and the transition has not started really in North America, 54% of our business awarded in 2022 were for e-mobility. The trend is clearly here in Air & Cooling, and the technology is ready. In Suspensions and Filtration, we have also continued to be very aggressive from a business acquisition point of view.
As I was mentioning before, in China, we have been able to be awarded on an important contract for stabilizer bar. In U.S.A., we have been also awarded with a very big player in North America. Basically, it's the best-selling car today in North America for ICE application. There will be, in 2025, a new version, full EV, and we will produce the components for this car. We have very high expectation from a volume point of view. In Filtration, despite the diesel decrease on the market for the last two years, we have been able, thanks to the deliveries, qualities always on time and as requested by customer, to get market share and to continue proposing new products to our current customers and new customers.
Currently, we are continuing to prepare the future because almost 70% of our current quotations are for e-mobility. When we say e-mobility, it could be hybrid, full EV, or hydrogen. Of course, Air & Cooling has a very high rate, 77%. Suspensions, almost 70%. Filtration, today 42% of our quotations are for mobility application. Thank you, Lily. The market outlook. It's of course quite difficult to totally predict what the market will be. Our expectations are that the market in Europe will be flat or with a limited growth. In other geographical areas, we prefer to forecast a limited increase of volumes in order as we have always done to be ready if the market is flattish.
Nevertheless, we can see that on EV volumes, there is a clear increase compared to 2021. On the market of raw materials, it's also very difficult to predict, especially linked to the energy costs, where you can see a lot of fluctuation. We don't expect the steel and resin or aluminum prices to go back to 2019 level. Nevertheless, we can see decrease versus 2022. Let's see if it will be confirmed in the next months. We can of course feel the generalized inflationary pressure, and our job will be, as we have done in 2022 and the years before, to compensate that internally or with our customers.
We continue, we commit to continue to the full execution of the structural actions that we have launched already two years ago and in 2022, and continue in 2023. If we look at the IHS forecast for the market, what is foreseen right now is the market increasing in 2023 versus 2022 by almost 4%, 3.6%, with Europe expected to grow by 7%, North America by 5%, South America 5%, China flat, and India 7.7% after a very strong 2022. It's maybe a bit too early to speak about 24, even if IHS continue to see an increase of 4%.
As I have said before, our assumption internally are more conservative, in order to be ready and to continue to do the job on our cost internally. Based on that, if we look at the outlook of 23, We have a clear lack of visibility on what will be the automotive market trend in the full year 2023, due to the macroeconomical evolution, the conflict in Russia and Ukraine, and also what will happen with the raw materials prices or availability, based also on the relations with China. On 23, as I mentioned before, S&P Global IHS is still foreseeing a market growing. Concerning the raw material, it's a bit too early to have a clear indication of what will be the trend of the full year.
I think especially on energy, it can have impact, good or unfavorable, so we continue to monitor that in a very careful way. Remember, in 2022, we have been able to pass through and to also implement strong action in order to absorb the fluctuation of the prices of material or the energy. We will continue to do that in 2023. Based on all of that, being only in February, our outlook for our result of 2023 is to be at least at the results of 2022 on operating results, excluding all non-recurring charges. Of course, I will be more accurate in the coming meetings that we will do together. We have completed the presentation. Thank you for your attention.
Now we are at your disposal for all the questions you may have.
Please, you can raise your hands. I see the first hand is from Monica. Give me one second to open your microphone. You have to open your microphone by yourself. One second.
Hello. Hi, can you hear me?
Okay.
Okay.
We hear you. We hear you.
Good afternoon, everybody.
We can see you. We can see you.
Hello, Monica.
Hello. I hope you are well. Thanks for taking my question. The first question is basically on the footprint, on the production footprint. I was wondering if you are planning higher restructuring charges for 2023, to address in deeper the manufacturing footprint, mainly in Suspensions, whose profitability is still quite low. If you can elaborate on this, it would be very helpful. The second question is on the quotation on the e-mobility. At the end of 2022, quotation for e-mobility were at, just let me check, 69%. But I remember that at the end of the 9 months, the level was 84%. I'm just wondering if you can elaborate on this.
Lastly, if you can give us some highlights on the expected free cash flow generation for current year. Thank you.
Thank you, Monica. Good three questions. Thank you. Footprint in 2023, as you may know, I think, I've already mentioned it. Yes, we will do 1 more plant.
Is now exiting.
We will do one plant, one factory in Suspensions footprint, so to be precise, in U.K. This is already accrued in the EBIT, but this will be cash out in 2023. On e-mobility percentage, it's due to 2 factors. In fact, it's a good news that the percentage decreased. I will explain why. First, we have been awarded on a big business that was in the pipeline in September. In the meantime, we get a big RFQ that we are quoting in North America. But it's not e-mobility, it's thermal because it's North America, and it's very big in a turnover point of view. It's diluting the percentage of e-mobility. It's linked to the fact that we have Europe, North America and China.
In USA currently, even if we are e-mobility RFQs, the ICE RFQs are still very big from a turnover point of view. As soon as you start to quote one, it dilute the percentage of e-mobility that we have on the pipeline. I open these two questions, Monica. I have answered your questions. I will let the free cash flow to Olivier.
You have answered. Thank you very much. Just the quantitative indication on the rest.
I think you have been muted by Stefano, but I have been able to read on your lips. I think you were asking the qualitative.
Quantitative financial charge.
Qualitative charge of the restructuring.
Yeah.
We will be very close to 2022 level, basically.
Okay.
Not with the same structure. We have done in 2022, Germany and central restructuring. In 2023, basically, the cash out will be very close, including UK.
Okay, thank you.
Not much more based on the current market situation, of course. If the market will change, then we will adapt.
Thanks.
On the free cash flow, I will let Olivier give the indication.
On the free cash flow, the guidelines are quite the same than for the EBIT and net results, in line with 2022.
Thank you.
Okay, next question is coming from Martino De Ambroggi. One second. Monica Baggio is now exiting. Martino. Martino, si sai?
Mute him. Mute him. Make sure he's muted.
Martino.
He's probably away from his machine.
Jean-François, sorry, can you please try to put Martino inside the meeting and open his microphone? I cannot do it.
It's in a meeting. I cannot do more with entering. I allowed him to enter.
I think it's maybe on Martino's side. Stefano, let's take another question waiting for Martino.
Another question. Okay, Alexander.
Hello.
Alexander, can you hear us? Okay.
Can you hear me well?
Yes, yes.
Yes. Okay. Hello. Thank you for taking the questions. The first one is on this non-recurring, non-operating costs. Could you please come back to those for Q4 and the level that we should expect for 2023? The second question is on the tax rate. Sorry for this modeling question, the level that we should expect for 2023. The last one is more a question on China specifically. Your exposure to the newcomers or the Chinese automakers, which are very strongest, especially on the electric vehicles. I mean, any comment on the growth profile with them, and also working capital?
Because I, depending on your exposure, because I understand that the payment terms, let's say they're a bit trickier, compared to the international automakers. Any comment on this would be helpful. Thank you.
Thank you for the question. I will start by China and then let Olivier comment the two other points, the financial points. On China, since the beginning, we are in China for more than 10 years. We have always been selective on the customers with whom we were working and the product on which we were investing. Basically, we have very strong relations with BYD, which is one of the fast-growing Chinese OEM. Very good relation with SAIC, with Geely. We have been very careful, let's say, with the real new entrants, because BYD, SAIC and Geely are quite big companies and not really big newcomers.
The only newcomers with whom we have decided to go is a big electronic company which will start to do cars in 2023, starting by a X, and I cannot say more, because we believe they have what it takes to do good volumes, and good technology and a good market share. Your question is very good because when we started to grow in China, we have noticed that some customers, from a working capital point of view, payment terms and so on, could be very tricky. We have been very careful on always having good payment term, and even in case of cancellation of programs, to have strong contracts in order not to have bad news. In one end, we have been very dynamic.
In the other, we have been very selective in order to avoid issues. I don't know, Alexander, if it answers your question, but we have a positive exposure, I would say, and not unfavorable one. Of course, we are working with the Europeans. I have to be clear with that, including the Germans and Stellantis there. The only thing that can happen is if one of these OEM decide to exit or reduce its capacity of production in China, and then we will discuss and negotiate with our customer. I let Olivier answer on the non-recurring and tax rates.
With regards to non-recurring, in our Q4, we have been hit by two main items. The first one is the goodwill depreciation on Suspensions. We had to impair our Suspensions goodwill for EUR 5 million. We have, as I told, the pension fund settlement in the U.K. for EUR 3.5 million. We have decided to seize the low interest rates to exit from these schemes. With regards to our tax rates, in Q4, both items, goodwill impairment test and pension schemes are not deductible, we have high charge on which we cannot calculate the different tax assets.
With regards to 2023, we are expecting a tax rates in line with normal situation, i.e., around 35%-34%, something like this.
No, that's very clear. Thank you very much.
You're welcome.
We turn again with Martino. Martino, try again now. Martino? I see you, but I cannot hear you.
Can you hear me?
Yes.
Yeah, yeah.
Okay, Martino.
Okay. Big issues today. Thank you. Thank you. The first two questions are on the guidance. Maybe it's a stupid question, but just to be clear, the operating profit guidance, are you referring to the absolute value, EUR 74 million adjusted for non-recurring, or as a percentage on sales? It doesn't change a lot, but just to be clear. In terms of free cash flow, could you remind us what are the underlying assumptions in terms of CapEx, working capital factoring? Because if sales go up, it's probably higher the level of factoring, and probably also for 2022, more than EUR 10 million of free cash flow come from this effect.
The second question or third, depending on how you want to consider them, financial costs for 2023, considering that you have 45% in floating rates. I don't know if you swapped into fixed rates. On the debt, you probably have any other divestiture in mind, or you are okay with the current perimeter? Very last, on the restructuring cost, if I remember correctly, in the last call, you mentioned EUR 12 million for 2022. At the end, you came out with EUR 8 million, and probably EUR 8 million is a similar figure for 2023. Is there anything that is going down in your restructuring process, or it's just probably just a bit of delay in getting this cost on the P&L? Thank you.
Thank you, Martin. First, thank you very much because I bet with Olivier that you would be the one who will ask the question if it's in % or absolute value. We have not treated it. I was expecting your question. As the turnover is supposed to increase because the assumption of markets are still increasing from a volume point of view, it's in %. It's in % if the sales are up. If market was down and sales were down, then it would be on me and my team to be able to deliver an absolute value. In the current situation, it's in %, our commitment. I will answer on the restructuring and let you answer on the other question. On the restructuring, it's not a delay or a slowdown.
I would say it's more from a cost point of view. We have been able to do what we had to do with lower costs. Basically, both in Germany and UK, we have been able to do the job with lower cost than forecasted. No slowing down on that topic. We have done the job, and we will continue to do it in 2023 with the plan that we established. Olivier, I let you maybe answer on the others.
Sure.
The most difficult are always for you.
No. Mine are more technique. You have a difficult one, which are business one. With regards to cash flow, as I said, in 2022, we had the pension schemes exit for an amount in cash of EUR 8.3 million. When we are saying that we will be able to maintain our level of cash flow in 2023, that means that we are forecasting to offset somehow paying up. We are not expecting to increase the recourse to factoring more than what we are doing. We maintain the ratio. We don't want to increase more the factoring. In terms of interest, it will be as I said, we have half of our debt at variable cost. We will decrease our net debt, of course.
We are forecasting an increase of our cost for roughly EUR 1.52 million.
The divestitures, if any?
We will not.
You mean the ratio of the debt? You mean, pay down debt or replacing the debt? Or what type of?
No. Assets, divestitures like you did a couple of years ago.
That's something we will not discuss around this table, if I may.
You are thinking about it, so I understand you can't provide anything.
No, no. As Olivier mentioned, you know us, we are always very pragmatic. The market currently, from a technological point of view, is still unclear. You know, we are, as always, checking everything that can happen on the market, but we don't have an established action or plan in the coming months. Nevertheless, the market is going very fast, so we have to check everything that can happen on the market. I think like everybody right now.
Okay, thank you.
Thank you.
Okay. I don't see any other raised hands, so if you want to ask question, please raise your hand. Yes, I see. Two seconds. No. Gabriele, were you Gambaro? I read that. Okay, now I see you. Let's see. Okay, now you can go ahead. You have to open your microphone by yourself. Yes.
Okay, I hope it works. Just a couple of questions from my side. Couple of weeks ago, on the local, let's say, press in Italy, there was, let's say, the news was reported that Stellantis was asking for a reduction of around 7% in some kind of part supply. I was wondering if you are seeing anything similar. Maybe it's just, I don't know, a local issue and a local aspect. In general, do you see any, or you foresee or you are factoring in any price, let's say, reduction from the
Each year Stellantis and your request sender send us a letter asking 15%. Seven percent, a request of 7% is as a request. We are all free to request then it's, if you accept or not. Say that, yes, I can feel and we can see that. I think you too maybe on the newspaper, television, that our customers maybe are becoming a bit more, from a pricing point of view to the final customers for cars becoming maybe a bit more aggressive, or there is a change of trend. The cars price are not increasing anymore, and you can even start to see some discount, after, I would say, 2 years of price increase. Basically, we expect 2023, where the customers, of course, the OEMs, will have, a strong price, pressure.
Will push for a strong price pressure on the suppliers. It's part of our industry and the game. It will be on us to explain the rationale of what we can do and what we cannot do. Yes, the market may switch from a pricing point of view for the car prices and de facto the pressure on the suppliers.
Okay, thank you.
You are welcome.
Is there any assumption in your own guidance on this front, or you're assuming flattish prices?
For now, in fact, as the energy prices, the raw material prices are not stabilized yet. Basically, if you look at the energy prices, mid of December, it was very high. Then mid of January, boom, the price is reduced. For now, it's very difficult to be very accurate on that. The only thing I can do is to say, as in 2022, that the squeeze will be close to neutral, basically in one way or another. If the material prices increase, then we will have to do the job internally with actions and externally with our customer to compensate. Vice versa. If the material prices are dropping, then we will have to discuss with our customers what we can give. Basically, our assumption currently is to say a squeeze at 0 in one way or another.
It's the most accurate we can be in February in the current situation.
Okay, thank thank you very much. The other question regards China, because, you know, geopolitics is very difficult to assess these days. You also made the reference to the possibility that someone, some OEM decide is totally, I think, theoretical, that he decides to get away or to leave or do something in China. I was wondering if you have any insight, any thought to share with me about this. I mean, it's the biggest market in the world, but clearly geopolitics pose some issue. I don't know. Do you see anything new, anything that keeps you awake at night in this market? Anything you can share with me would be very interesting.
No, I don't have inside information about China from a political point of view or macro point of view. As you said, it's the biggest market from a automotive point of view. We continue, of course, to develop in this market. It's more on the other side of the business, where without having any inside information, in case of, we have some B plan for what we purchase from China for Europe and North America. It's not so much on the customer side, it's more on the supplier side in case of something happens. I don't say something will happen or I know something. I prefer to have a B plan and a second supplier, not from China, in case of. Especially for North America.
Basically, everything we purchase from North America to China, we have already established and identified and validated second suppliers in case of something political happens and we cannot source any more from China. I'm, as all of you, I'm following that very carefully, and we will have to be flexible. In the other hand, we have done it in 2022 with Ukraine and so on.
Okay. Thank you.
the supply chain of automotive-
Is now exiting.
Is more agile than what we were, I think, two, three years ago. We are more used to it. That's it. I cannot predict what's gonna happen. We can just prepare to everything, and then we will see.
Okay. Thank you very much. Very last question on Romania. If you can tell me what could be the contribution from Romania in terms of revenues or EBITDA this year, possibly?
EBITDA is a bit difficult. On Romania, what I can say is that the turnover based on the current market is increasing by 20% versus 2022. The slow but sure growth of Romania is continuing as planned with the full ramp-up of the programs we started last year. It's continuing to grow. Now, after two years ramping up this plant, we have to establish, you know, some kind of real standard of production and delivery. To have the maturity of the plant, I think it has to be this year. By the second part of this year, I think we'll be able to have more maturity from an industrial point of view.
Okay, thank you very much.
You're welcome.
I think there's a follow-up question from Martino.
Yeah, thank you.
We cannot hear you.
Maybe a microphone on.
Today it doesn't work as usual. Can you hear me?
Yeah. Yes.
Okay. Sorry. Still on the Romania plant. I don't know if my notes are correct, but I remember in 2022 you expected a loss in the region of EUR 8 million, and could have been halved more or less in 2023. That is still losing EUR 3 million-EUR 4 million. That's the last note I have in my, in my notes. In terms of inflation, sorry if I missed it, could you summarize what is the total impact that you have embedded in your guidance in terms of very rough energy, labor, raw mat, and so on, for 2023?
Just back on the free cash flow, what are the underlying assumptions on net working capital and CapEx that probably I didn't get in the previous answer?
On Romania, your notes are correct, basically, both for 2022 and 2023. Except a big issue on energy prices, basically, it should be by the range of Romania for 2023. The figure for 2022 is very correct. It's very close to it. On the inflation for 2023, as I said, considering the material and energy prices, our assumption is to consider, has been to consider a squeeze at zero. Between the forecast of November and February, there has been a big change on the energy. Because in November, honestly, we were quite pessimistic about the energy prices for the full year, we were considering a strong repricing with our customers. This assumption has changed for now, we are discussing with our customers on energy prices with a much more limited impact.
Energy prices, for now should be much lower than what we were anticipating. On the material, the steel is decreasing and aluminum has decreased too, and plastic started to decrease. Right now we are in the middle of discussion with our suppliers and customers, basically it seems that the trend is positive on the material prices. Let's consider 0 of squeeze between energy material on these two items. On the salary inflation, here it has to be done internally. The assumption we considered is you cannot go to a customer, an OEM, saying, "I increased my salary by 5%, 6%, 7% or 3% or 2%. Give me a price increase." It's not like the energy and material.
Our assumption has been to consider that whatever would be the salary increase, except in South America, hyperinflation in Argentina, we have to recover it internally with actions, with productivity actions, automatization actions, industrial actions, efficiency actions. These are the assumptions that we consider. To give you absolute value right now will be somewhat misleading because I would say it's changing almost on a monthly basis. I think it's better to keep in mind the assumption that we will be able to absorb, except something very special, the inflation in 2023. In April or maybe in July, we will be able to be a bit more positive if the trend on energy price and material prices are confirmed.
Right now, I think before being too much happy, we have to wait that China reopens for real and to see what's gonna be the impact of China reopening, if it happens, on the material prices. Energy prices, you all know better than me, it's very difficult to predict. Of course, we have some conservative approach with my team taking the opportunity of the current prices for the months to come. Really on the free cash flow, the... CapEx will be roughly on the same level than in 2022.
Yeah.
We are not foreseeing any deterioration on our working capital. There's no reason to foresee any deterioration in our net working cap ratios. Not even an improvement because of the lower raw materials.
We will also have sales increase, so no. There is some. Yeah, on inventory right now, based on everything we said before, I still prefer to keep a good coverage on the inventories. Especially on raw material, not on finished product. In the first month of the year, we will not decrease it, and then we will see. If there's a stabilization of Russia, Ukraine, China, and so on, we can be a bit more aggressive in the second part of the year. The only thing that can happen, affect the working capital will be a strong increase of sales. I would say it will be a good news, basically. Not a big negative impact, not also a big positive impact for us on the working capital this year.
Thank you.
Okay. I see a last question from Nunzio Celentano. Nunzio, please, if you can introduce yourself, the first time we meet with you and ask your question. Let's unmute your microphone by yourself.
Can you hear me?
Yes.
Yes, very well. Thank you.
Good morning. Yes. Nunzio Celentano from BNP Paribas. I have just a couple of question. The first one regards the transition towards e-mobility products. What do you think about the latest guidance you gave us regarding the 45% target within 2025 vis-à-vis your total group sales? The second question is regarding the percentage of debt that you have now as fixed. You say the 50%. Do you think you feel comfortable with it towards full year 2023? Do you think you are thinking about a reduction of variable debt? What is your feeling about your gross debt which has an exposure towards interest rate risk? Thank you very much.
Thank you, it's a pleasure to meet you virtually. About the e-mobility. First, rather than a commitment on the percentage of our sales, our target is to duplicate the market. As you all know, in e-mobility right now, of course, there is a big push. Everything can happen from a technological point of view also. At Sogefi, we continue to be technology neutral. Basically, some of our customers wants ICE, we do ICE. Some EV, we do EV. Some hybrid, we do hybrid. Some wants hydrogen, we do hydrogen. What we do, we try to duplicate the market in each part of Sogefi where it's possible. Of course, don't forget that at Sogefi we have actual market, which is big part of our turnover, in Filtration, as you have seen before.
We have also heavy duty activities, for EUR 120 million, so it's not nothing. We have big activities in South and North America. When we look at the percentage of e-mobility turnover, we have to look it at by geographical area, and even, I would say, by subdivision. Our commitment is to duplicate and to be aligned with the market percentage, year after year, where our product makes sense. In Air & Cooling, of course, we have dedicated products, specialized on the thermal management of the battery and the electronic. On Suspensions, it will be much more to have the same product, but going on EV cars and hybrid cars. In Filtration, as you can see, we have started to have some products, especially on the transmission filter and air cabin.
Basically, this is where we go. It's a market where it's growing very fast. Everybody is going in full speed in EV. In the same time, you can see also the Japanese and some others saying, "Okay, there may be also over over direction." We are very careful on that approach, going full speed on the market side. On the percentage of debt, I'm not an expert, and Olivier is a real expert. I would tend to say that our debt has reduced in a very interesting way in the last two years. I would say that our ratio is more than acceptable. Olivier?
Yes, we do not foresee to swap more of our variable parts to fix for the time being. We would not... Of course, it could change in the coming months. We are always very careful of this. For the short term, I do not expect to make any move.
Thank you very much.
Thank you.
Okay. I don't see any other question. I'll do a last follow-up. If somebody want to ask question, please raise your hand. I don't see any further questions. I hand over to Frederic to say hello to everybody.
Not hello, but goodbye, and thank you very much for having joined this conference call. I hope to see you with good news in a few weeks for the first quarter results. Thank you, everybody, and have a nice weekend. Thank you.